Daily Market Update

Tight markets ahead of central bank decisions

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The U.S. Dollar is trading in mostly tight ranges having lost its gains from the end of last week against the G-10.

Overview

It is unclear if the buck will finish off strong this year as the Fed hike is likely, but not guaranteed with chances at 74.0% of an increase at the meeting Wednesday. The economy may be stronger than other global regions, but traders doubt the Fed can continue with its planned hike path into 2019. This particular sentiment is what keeps driving the greenback one or two steps backward when it seems ready to surge.

Empire State Manufacturing survey came in less optimistic than expected as the growth outlook was worse in December and came in at half the estimated reading with an actual 10.9 under the predicted 20.0. We shall see if this week defines where the dollar is headed, with now mounting analyses that the current economic momentum could come to a halt next year.

What to Watch Today…

EUR

The Euro is slightly better off this morning, with inflation in the form of Consumer Price Index showing growth as expected of 1.0%. Additionally, the budget negotiations with Italy seem to be going well as the government is reported to have conceded their demand for a higher deficit percentage. They still want something above the 2.0% limit, at 2.04%, a change though from the much higher request of 2.4%.

We do not see much in terms of big news for Europe in the next few weeks as they enter the holidays, but do pay attention to Brexit dynamics because any sort of Christmas miracle or worsening of the ongoing nightmare could pull the shared currency one way or the other.

GBP

Although Prime Minister Theresa May survived all kinds of attacks domestically last week to the point of even staying in power after just making the cut following her own party’s confidence vote. Nevertheless, there is no progress in making her Brexit deal appealing or digestible for Parliament.

A summit last week was rendered useless since all the EU leaders could muster was support for May in her battle to win votes back home. British citizens and media are now asking themselves if a second referendum will be possible down the line or if the deadline will come in January that once it arrives will mean the Parliament chooses the next step. Thus far, Sterling is down over 6.0% in 2018, maybe there is room for further sinking.

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